Chapter 7:
CORPORATE AND
SOCIAL RESPONSIBILITY
AND CORRUPTION
IN A GLOBAL CONTEXT
01 UNDERSTAND GLOBAL
CORPORATE SOCIAL
RESPONSIBILITY AND RELATE
HOW CSR AFFECTS
LEARNING
DEVELOPING COUNTRIES.
02 ENUMERATE AND DISCUSS THE
OBJECTIVES: CSR IN INTERNATIONAL
BUSINESS.
After studying this chapter,
the student should be able to:
03 UNDERSTAND AND EXPLAIN
THE IMPACT OF CORRUPTION
INVOLVING LARGE
MULTINATIONAL COMPANIES.
04 ENUMERATE SOME OF THE
INITIATIVES TO DETER THESE
WHOLESALE CORRUPTION
PERPETRATED BY INTERNATIONAL
BUSINESS AND HOST COUNTRIES.
Corporate
SOCIAL RESPONSIBILITY
Corporate Social Responsibility In fact, CSR means different
(CSR) has gained currency. things to different people.
Companies are adopting “ethical However, certain ideas are
policies” or “codes of conduct” becoming commonly accepted.
stating how they intend to Through CSR, enterprises are
‘behave’. More companies are intent to strike a balance between
signing up to such initiatives as and social goals, where resources
the United Nations Global are being used in a rational
Compact or the Fair Labor manner and social needs are be
Association. addressed responsibly.
Corporate SocialResponsibility
IN A GLOBAL
CONTEXT
Csr and JUSTIFICATION FOR CSR
Developing Countries There are two broad sets of justifications for public
sector actors in middle and low income countries
The concept of CSR aims to to engage with CSR; defensive and proactive.
examine the role of business in
society and to maximize the Defensive Justifications
relates to minimizing the potential adverse
positive societal outcomes of
effects of CSR on local communities,
business activity. The result has environment and markets when it is imposed
been CSR practices that are through international supply chains and
largely farmed in rich countries, investment.
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then internationalized and
Proactive Justifications
transferred to other businesses
for public sectors to engage with CSR is
and social settings through provided with the opportunity to increase the
international trade, investment, domestic public benefits of CSR practices in
and development assistance. economic, social and environmental terms.
A MULTIPLICITY OF
Potential Roles POLICY INSTRUMENTS
OF GOVERNMENTS IN CSR practice has identified five distinctive
THE CRS AGENDA roles for public sector engagement with CSR:
A first broadly defined goal of regulation
public engagement in CSR is the facilitation
alignment of business activities partnership
and public policy to achieve endorsements
societal goals. A clear government
demonstrations.
vision of how it wants to address
issues where there are potential In the broadest sense of CSR, the entire
trade-offs between economic, body or social and environmental
social and environmental legislation in any country can be seen as an
considerations. expression of public sector engagement
with CSR.
CRS in
INTERNATIONAL
BUSINESS
SUSTAINABLE DEVELOPMENT HUMAN AND LABOR
AND ENVIRONMENT RIGHTS
It is expected from a socially
Many studies have shown responsible behavior standpoint
that in the medium-term, that corporations should be
this model will bring out consistent with the principle of
fairness and respect of basic
about better consumer
rights.
favor, product innovations,
process innovation, and In affirmation to this, the
the most basic of all the entrepreneurial strategy of these
advantages, raw material large entreprises should be
savings. based on the following CSR
demands:
Be Compliant
Be Consistent
LOCAL ECONOMY AND
SOCIETY
A good number of international companies have visible initiatives
that can be called "CSR in action", they are manifested by giving out a
portion of their income for projects like maintenance of roads,
improvements of public hospitals, adoption of a school and many
other activities that should have been rendered by the government.
These kinds of activities would give a good feedback from the
community, create a good reputation for the company and at the
same time, propel the societal integration and consolidation of
stakeholders and the enterprise.
TRANSPARENCY
managerial initiative which evolved
Corporate transparency is a form of deep-rooted
into a philosophy of removing walls and facilitating free and easy public access to
corporate information. It involves openness, communications and accountability.
Transparent measures include financial disclosure statements, the freedom of
information legislation, budgetary review, audits and religious compliance on
reportorial requirements of the authorities.
LEGALITY
The adherence to the applicable set of laws in force is the minimum requirement.
The prerequisite of CSR is to go beyond the law provisions in order to contribute
to the establishment of a fair and sustainable development. Therefore, it is clear
that a socially responsible enterprise rejects conducts and practices such as
unfair competition, corruption and tax evasion that put at risk the growth and
development of the societies.
CONSUMERS SUPPLY CHAINS
The "aware consumption" represents, Due to market globalization, supply
therefore, a new approach to the chains have become a very complex,
social responsibility of enterprise and often outsourced in countries where
of consumers that are acquiring human right protection is low or there
growing importance in the market by are no environmental regulations, or
promoting a production that is safe tolerance of hard labor is high due to
and compatible with a sustainable absence of choices (an ugly head
and fair development. The consumers' exploitative conduct). This situation
demands not only concern health and represents a critical point for
eco-sustainability of the goods and of enterprises that have chooses to adopt
all the productive phases. but also a socially-responsible conduct. The lack
attestation that they are not produced of ethical control on the supply chain is
by means of exploitation of human becoming a not only a commercial risk
resources. but also a financial one.
Corruption in
INTERNATIONAL
BUSINESS
Globalization of CORRUPTION
- Corruption takes many different forms, from the routine cases of bribery or petty abuse of power
that are said to “grease the wheels” to the amassing of spectacular personal wealth through
embezzlement or other dishonest means.
- For MNCs (Multinational Corporations), bribery enables companies to gain (particularly for
public works and military equipment) on concessions which they would not otherwise have won.
- Bribery is also increasingly subtle. It often takes the form of semi-legal fees or “commissions”,
and inflated or marked-up prices.
EXPORTING CORRUPTION
The corrupt practices of They disadvantage smaller They also increase debt;
multinational corporations domestic firms. They transfer benefit the company, not the
affect other countries in money that could be put country; bypass local
many ways. They towards poverty eradication democratic processes;
undermine development into the hands of the corrupt. damage the environment;
and exacerbate inequality They distort decision-making circumvent legislation and
and poverty. They in favor of projects that promote weapons sales.
undermine development benefit the few rather than
and exacerbate inequality
the many.
and poverty.
Bribing high-level Bribery can be a
Bribes increase the officials ensures profits useful way of getting
prices of projects. and helps off-load risks.
around local
In many power projects
When these projects opposition to a
in Asia, for example,
are paid for with there has been, project and of
money borrowed according to the World bypassing the usual
internationally, Bank, both "a high level of democratic
corruption" and a
bribery ads to a processes involved
tendency to
country's external with awarding
overestimate demand
debt. for electricity. contracts.
Benefi ti
ng the
Bypassi ng Local
I ncreasi ng Debt Company, Not the
Democrati c Processes
Country
DESTROYING THE ENVIRONMENT PROMOTING ARM SALES
AND GETTING AROUND The arms trade is one of the most
REGULATIONS corrupt business globally. It is an
international trade that are linked
Some companies use bribes as a
to arms deals even though the
way of getting around
arms are trade only accounts of
environmental regulations.
global trade.
m o r e
HIDING
THE LOOT
Western Banks and
THIRD WOLD ASSETS
Private banking services and offshore financial centers are the major conduits
and repositories for bribes and corrupt gains.
Private Banking The Boom of Private Banking
Increasingly used for confidential 1. Origins in the debt crisis
services to international elite.
The average rate of return to banks 2. Continued indebtedness of poor
for private banking accounts is over countries
20%.
3. Global phenomenon
Predicted to grow 2 to 3 times fast
as ordinary consumer banking.
Offshore Banks
EXAMPLES: and Companies
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Asif Ali Zardari, the husband of former
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Pakistan prime minister, Benazir Bhutto, who
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transferred some $40 million through
Citibank accounts, of which $10 million is Money is siphoned out of poor countries
believed to be from kickbacks on a gold and hidden well away from the citizens.
importing contract.
Tax havens have been a magnet for money
Raul Salinas, the brother of former Mexican
from Third World countries.
President Carlos Salinas, who transferred $80
to 100 million in alleged drug money out of
When dirty money disappears offshore, it
Mexico between 1992 and 1994 through
becomes more difficult for the
Citibank's accounts.
governments to tackle corruption.
In 1998,
RECOVERING US$500 million of former Philippine President
Ferdinand Marcos' money was returned from
STOLEN WEALTH Swiss banks to the Philippine government. The
Commission on Good Government set up
after Marcos was deposed has recovered
International pressure has been overall some $1 billion of the $5 billion that the
Marcos family squirreled away.
mounting in recent years to return
money which has been stolen from In November 1999,
public treasuries and stashed away the Bank of England identified and froze the
in READ
Western London bank accounts of Angola's rebel
MORE banks and offshore tax
leader, Jonas Savimbi, who was until recently
havens. Several precedents exist aided and abetted as an anti-communist
for the return of such funds: "freedom-fighter" by several Western
governments, including those of the US and
UK.
Blacklisting
CLOSING THE
LOOPHOLES COMPANIES
More sweeping attempts to recover Sanctions committee meets
stolen money will require both regularly to review investigations
promulgating an international and to debar firms found guilty.
convention and closing loopholes There were 54 companies as of May
that allow ill-gotten gains to leave 2000.
countries.
Concerted international action on
Vital to stopping the laundering of corruption could include creating
corrupt money and the draining of an international database of
resources from the Third World. blacklisted companies.
Government ACTIONS
All governments need to clean up their act but they need to do so in an
environment in which donors are not imposing inappropriate, over hasty policy
changes.
Any successful anti-corruption program has to build up at a national level, be
appropriate to local and national contexts, and have full support from government
employees at all levels.
Imposing anti-corruption strategies by putting up conditions on loans will not
work and may be even led to governments implementing cosmetics changes which
at the best, do little and, at worse, undermine the anti-corruption efforts.
Deterrents RESISTANCE
Fighting corruption is increasingly engaging the
energies of civil society groups around the
world. To be effective, they must:
Economic punishments are
some of the most effective
deterrents in corruption. 01 Mobilized Ordinary People
02
Opening development projects Push for Freedom of
to more public scrutiny can be Information
another effective deterrent.
03 Help Increase Citizen Participation
in Decision-Making
MOBILIZE Push for freedom
ORDINARY PEOPLE of information
Enable ordinary people to
Civil society groups will need to be use information. Only if they
separated to be prepared to take on
have the relevant knowledge
governments in innovative and sometimes
can citizens hold their
confrontational ways. They will also need to
governments accountable
be committed to being transparent and
and ensure that resources
accountable themselves.
that belong to them are used
in the right way.
In Uganda, a popular phrase is abantu babisi meaning “people
do not know is going on”. It is used to show mistrust of
government decisions.
Greater citizen participation is also required in monitoring and
HELP auditing public expenditure. Civil society groups need to play a
INCREASE “critical auditing function…if they are to hold the state
accountable to their poorer citizens”.
CITIZEN Where work is put out to tenderise critical to ensure that there is
PARTICIPATION always an “in-house bid” from the public sector to set against any
IN private contractors’ bids.
decision making Cracking down on bribery will not necessarily make international
business more accountable. Nor will it end corruption overnight. But
it will help send a clear message that the international community is
intention restricting the “supply side” of bribery. Companies must not
be allowed to continue to behave in unethical ways that undermine
local democracy and development.
chapter 7
prepared by:
Pepito, Hazel Anne P.
Areglado Kaye L.
Layese, Mary Jocel G.
Casile, Ruth S.
BOlonos, Mary Grace
THANK YOU!
